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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI AMARJIT SINGH, JM
This appeal is field by the assessee against the order of the Commissioner of Income Tax (Appeals)-47, Mumbai [the learned CIT (A)] dated 14 September 2020 for Assessment Year 2017-18.
The assessee has raised the following three grounds of appeal.
“1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in confirming AO's
2. On the facts and circumstances of the appellant’s case and in law, the Ld. CIT(A) erred in confirming the AO's action of disallowing a sum of ₹44,651/- under section 37(1) in respect of interest paid on delayed payments of service Tax, Provident Fund and VAT.
3. on the facts and the circumstances of the appellant’s case and in law, the Learned. CIT(A) erred in confirming AO's action of disallowing a sum of ₹9,26,837/- on account of provisions for TDR.”
The brief fact of the case shows that the assessee is a company engaged in the business of Real estate development and construction of residential cum commercial project at Dahisar. The assessee is in the business of construction of real estate and is following a percentage completion method for income-tax return. The assessee filed its return of income on 30 October 2017 declaring total income at Rs. Nil. The case of the assessee was picked up for scrutiny and necessary notices were issued. The learned Assessing Officer passed an assessment order under section 143(3) of the income-tax Act, 1961 (the Act) on 25th December, 2019, wherein following three additions were made:-
i. Interest on delayed payment of ₹44,651/- iii. (iii) Provision for Transferable Development Rights (TDRs) claimed as an expenditure of ₹9,26,837/-.
Aggrieved by the order of the learned Assessing Officer the assessee preferred the appeal before the learned CIT (A), which was dismissed, and therefore, the assessee is in appeal before us.
We find that the appeal is delayed by above 56 days. The fact shows that the CIT (A) passed an order on 14 September 2020. The assessee submits that it did not receive any communication. Order was uploaded on 28 January 2021. As soon as the order was available, assessee filed an appeal on 1 February 2021. As the time limit for filing of the appeal expired on 6 December 2020, the appeal was delayed by 56 days. The assessee submits that the delay caused is for sufficient reason. It is also supported by the affidavit. In view of this delay in filing of the appeal is condoned.
The first ground of appeal is with respect to addition of ₹40,157/-. The fact of the case shows that assessee has shown untraceable credit in the bank account of ₹12,19,155/- which include at an amount of ₹5,98,988/- which is already taxed under section 68 of the Act in Assessment Year 2016-17. Therefore, the assessee was
We have heard the rival parties. We find that assessee has shown untraceable credit entries in the bank account as a separate item. Such is the amount shown under the head Sundry debtors (others) having the credit items. Before us, it is shown that the entry dated 30 September 2016 is a TDS receivable for Assessment Year 2015-16 amounting to ₹40,157/- which has been taxed under section 68 of the Act by the learned Assessing Officer. Looking at the details placed at the page 89 of the Paper Book, we find that the same entry relates to TDS credit
Ground no. 2 is with respect to disallowance of ₹44,651/- under section 37(1) of the Act in respect of delayed payment of service tax, provident fund, and VAT. During previous year assessee paid interest on delayed payment of service tax amounting to ₹1590/-, Interest on delayed payment of provident fund of ₹15,934/- and interest on VAT of ₹27,127/-. The assessee explained that this interest is compensatory in nature and therefore the same is allowable as expenditure. The learned Assessing Officer held that such payment is penal in nature and therefore disallowable. The learned CIT (A) confirmed the disallowance by affirming the reasons given by the learned Assessing Officer.
We have carefully considered the rival conditions. We find that identical issue has been decided by the co-ordinate
The ground no. 3 is with respect to disallowance of provision of ₹9,26,837/- made in respect of purchase of TDRs. Fact shows that assessee has shown ₹6,08,67,000/- as provision for purchase of Transferable Development Rights. According to the assessee, it is an accrued liability and since the assessee is following percentage completion method, out of the total of ₹6,08,67,000/- as sum of ₹4,08,22,351/- has already been allowed as deduction in computing profits of the business up to 31st March, 2015. Applying the same percentage completion method for this year a sum of ₹9,26,837/- is claimed as deduction.
The learned Authorised Representative referred to Paper Book page no. 92 to 98 to show provisions made on base of percentage completion method. He further submitted that these appeal is pertaining to Assessment Year 2017- 18 where for Assessment Year 2016-17, the learned CIT(A) as per detailed order dated 12th December, 2019 vide paragraph no. 22 onwards, following the decision of Co-ordinate Bench in DCIT vs. Rajgir Builders (1999) 70 ITD 226 and in Persepolis Construction Co. (P). Ltd. vs. Addl. CIT (2006) 99 TTJ 92 (Mumbai) has held that cost of transferable development rights is an accrued fastened liability and not a contingent liability. Therefore, he submitted that as such claim is allowed to the assessee since 2009-10 it should be allowed.
The learned Departmental Representative supported the order of the learned Assessing Officer and learned Commissioner of Income tax (Appeals).
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 28.04.2022.